Case Studies of Performance Contracting in Higher Education Presented by Wayne Robertson, PE Energy Ace, Inc. Energy Ace, Inc.
Energy Issues Energy Costs Rising At the same time, budgets are being cut A squeeze on operating expenses But also a squeeze on capital funds, making it dff difficult to improve system efficiencies Energy Ace, Inc. 2008
Third Party Financing to the Rescue Investments in energy efficiency are among the best an Owner can make Lighting g projects for example often have a 2-3 yr payback (33 33%-50% ROI) However, if Owner has limited capital funds he can t make the investment and reap the benefits. If Owner is willing to share the benefits, others will make that investment for him. Types leasing, Foundation projects, low-interest State Energy Office loans, Energy Performance Contracting Energy Ace, Inc. 2008
What is Energy Performance Contracting? An agreement to provide energy retrofit projects to an Owner with the costs repaid from savings. The Contractor (ESCO) provides energy analysis, design, & construction, guarantees the savings, arranges financing and provides O&M, training and program administration. Energy Ace, Inc. 2008
Essential Argument for PC Energy Ace, Inc. 2008
Performance Contracting Growth Energy Ace, Inc. 2008
Common PC Projects 1. Lighting usually #1 2. Controls Retrofits 3. VFD and Motor Replacements 4. HVAC Upgrades 5. Water Conservation Projects These often have good paybacks, especially lighting Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
Common PC Projects Good payback projects are often used to help pp pay for long gp payback projects Examples: Lighting with a 5 yr payback offsets HVAC project with > 10 yr payback or even non-payback projects like new roofs or security systems Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
Example Energy Projects Lighting Upgrades 5 yr payback DDC Controls for HVAC 4.8 48yr VFD s 4.9 yr BAS Recommissioning i i 34 3.4 yr Off-peak Supplemental Chiller 7.9 Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
Case Studies Winthrop University University of South Carolina The Citadel Middle Tennessee State t University it University of Alabama MUSC
Questions Asked Project Description Project Motivation and Goals Preliminary Planning Procurement Process Project Implementation Measurement and Verification Ongoing Services and Satisfaction
Questions Asked Project Description Project Dollar Amount, Year Construction Completed, Primary ECM's installed, Number of Buildings affected (is this campus-wide or a portion?). Have you done more than one PC project?
Winthrop University Lighting upgrades, HVAC improvements, steam system improvements and the big project: chiller plant and CHW extension. The principal p motivations to engage g in Performance Contracting were to obtain capital improvements and to rectify deferred maintenance.
University of South Carolina Project done in two phases: Phase One - $35 million 6,000 ton chiller plant Extensive water conservation program T8 and occ sensors Transformers VFD's, steam traps
University of South Carolina Phase Two - $18 million biomass boiler plant
Middle Tennessee State University #1 - $2 million for lighting retrofits in 23 bldgs, steam valve replacements, chiller optimization #2 - $4.5 million for onsite generators to peak shave, and $2 million for HVAC upgrades in a priority bldg
University of Alabama $5 million for lighting retrofits for 8.5 million sq feet in 200 bldgs No other ECMs
Project Motivations and Goals Winthrop Univ perform much needed renovations to the Student Union and create a new supply of CHW to 3 major buildings USC - take care of deferred maintenance, accomplish upgrades and to create needed backup for the CHW plant The Citadel energy savings and take care of deferred maintenance University of Alabama energy savings and better lighting MTSU utilize a very advantageous peak shaving elec rate and perform major HVAC upgrades to a high profile bldg
Questions Asked Preliminary Planning Phase Was the primary purpose of your Performance Contracting project energy savings, capital improvements, equipment replacement or something else? Was the program stimulated by an ESCO calling on you or was it in-house initiated? Had you performed your own energy studies first and found opportunities t that exceeded your funding abilities? When you decided to proceed with PC, did you generate your own RFP mostly from scratch or use a sample as a starting point?
Preliminary Planning Winthrop University already had experience with Perf Cntg so was the natural leader to develop a template for SC USC and The Citadel followed the template with their own modifications
South Carolina Model Pioneered by Winthrop University (had already done two others) Expanded by University of South Carolina Further Developed by The Citadel, MUSC Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
South Carolina Model Two-Step Procurement RFQ to select qualified ESCO s RFP inviting selected ESCO s to perform a Preliminary Energy Study (Preliminary Energy Study) Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
South Carolina Model One Selected ESCO then performs Detailed Energy Study (DES) DES must align with Preliminary Energy Study within certain parameters Institution obligated to pay for DES (but not for PES) If accepted, proceed with implementation Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
Alabama University of Alabama was first and so far the only college to use PC Complete lighting project for 8.5 million SF, 200 Buildings, $5 million Offerors conducted a walk-through energy audit of just three buildings Stipulated Services, minimal M&V Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
Preliminary Planning Univ of Alabama used a professional services RFP with appropriate changes MTSU developed its own RFP from scratch that became statewide model
Questions Asked Procurement Process - Briefly describe your procurement process for example, was it a two- step process (RFQ followed by an RFP) or straight out with an RFP? Where/how did you advertise it and did you also use a list of known ESCO's to receive the invitation? Did you require the Offerors to perform a sample energy audit as part of the competition?
Procurement Process Winthrop Univ 3 ESCO's responded to RFQ and 2 were selected to receive the RFP and perform PES The Citadel 3 ESCO's were shortlisted to perform PES University of Alabama 2 firms shortlisted but only one went ahead with detailed proposal
University of South Carolina Procurement Process Followed Winthrop example with one variation: paid for the PES rather than require competing ESCO's to perform PES at risk. ik Advantage would be that USC would own the losing firm's PES to use in any way. Hindsight: they would not do that again.
Tennessee Template developed at Middle Tennessee State University Used an Energy Management Motivation Form to establish priorities RFP included a cost model so that ESCO s competed on qualifications and margin or markup No guaranteed savings or M&V Creating Environmentally Energy Ace, Inc. Sustainable 2007 Buildings TM
MTSU Procurement Process RFQ to establish general quals, then an RFP using a cost model developed by MTSU Cost Model established prices in 2 categories: direct costs, and margins (overhead, profit, design expenses)
Questions Asked Project Implementation Overall, was the project implementation, i.e., design and construction phase, well-handled or poorly-handled? Was the work that was designed and built in reasonably good agreement with the proposal and did it meet your expectations completely, partially, or was a disappointment? How did the ESCO perform as compared to conventional contractors you have dealt with for other retrofit projects on your campus about the same, better, worse?
Project Implementation The shortcomings were in the lighting phase. This was poorly scheduled and planned Overall, the project implementation, i.e., design and construction phase, was well-handled. The work that was designed and built in reasonably good agreement with the proposal, which became a part of the contract. The ESCO perform better as compared to conventional contractors for other retrofit projects on this campus. The Performance Contracting process was simpler, chiefly due to its Design/Build nature. The project was handled very professionally and the campus was pleased with the implementation and overall outcome. Did hire an internal project manager in addition to that of the ESCO s to make the project flow smoothly. The contractor was better than most others the univ was dealing with at the time. So many State projects required the low bid whereas it was not a requirement on PC. We utilized a design/build approach and was entirely satisfied with the way the project was handled in both design and construction. It actually went better than typical construction projects, thanks to the design build approach. This was aided by the fact that the ESCO was required to follow the State design manual, just as if this was any other design or construction project. This included a requirement that the ESCO hire an independent design engineer from a pre-approved list developed for general state projects.
Questions Asked Monitoring and Verification If your project is constructed and now in the performance phase, do you feel that the promised savings are being realized? Is the M&V program offered by the ESCO giving you the information that you need for project performance tracking? Are the reports easily understood or confusing? Is stipulated savings a large part of the program?
Measurement & Verification Winthrop - When the M&V time came it was complicated by all the problems ranging from lack of meters, significant run time changes, improper p control strategies for the old building systems and problems with the east campus underground lines. MTSU did not utilize either a savings guarantee or the Measurement and Verification that would go along with a savings guarantee. This was done deliberately to keep more money available for actual projects and less money spent on project administration. Stipulated savings was a large part of the program and MTSU went into this with eyes open.
Measurement & Verification M&V has been a challenge for USC. In Research Facilities for example, a professor may bring in new energy intensive equipment; how do you isolate that from normal building loads or from the savings being generated by VFDs or temperature setback? It has been difficult to relate electrical consumption to weather because of the effect of Central Energy Plants that run all year. There are also the changes that may occur in a building during its construction - the addition of an AHU or new VAV boxes for instance. Finally, the water conservation savings have been difficult to measure because the water department meter reading program is not reliable; bills are often estimated and erratic billings result.
Measurement & Verification Univ of Alabama -Because this was lighting only, a large portion of the savings were stipulated. We did not want to use a tremendous amount of savings to prove that we were saving. The University stipulated to the burn time. We randomly selected lighting circuits for measurement of before and after retro-fit electrical use. We were able to reduce the overhead fees because of the limited on-going liability that the ESCO was able to reduce because of the stipulated savings
Questions Asked Ongoing Is the ESCO providing maintenance services for the ECM's it is guaranteeing? Did the ESCO provide satisfactory training for your maintenance personnel? If you had the need, would you do another PC project? If so, would you want to use this ESCO again?
Ongoing Winthrop would definitely do one again, but would be to hire the third party M&V consultant PRIOR to writing the RFP. Keep that consultant on board from cradle to grave (entire EPC term) and would have them help negotiate the contract, monitor the installations, ti verify the savings and hold coordination in general with the ESCO. The ESCO is not providing maintenance. UA would consider a PC project if the circumstances were right.
Ongoing MTSU is performing it's own maintenance. MTSU found the Performance Contracting program to be very satisfactory and would engage g in another performance contracting project, if needed. The ESCO is providing maintenance services for the ECM's it is guaranteeing. The ESCO provided satisfactory training for the maintenance personnel. If they had the need, they would do another PC project if they thought they could get it past the political i l process. USC would recommend that a university provide better definitions of quality standards in future RFP's.
Lighting Energy Ace, Inc. 2008
Controls Retrofits Energy Ace, Inc. 2008
VFD s and Motor Replacements Energy Ace, Inc. 2008
HVAC Upgrades Energy Ace, Inc. 2008
Water Projects New water closets, urinal flush valves, lavatory aerators 1.6 yr payback Submeter Cooling Towers 0.1 yr payback Steam Trap Replacements 3.9 39yr Ozone Laundry System 4.8 yr Cooling Tower Water Treatment Systems 9.2 yr payback Energy Ace, Inc. 2008
Other Energy Projects Energy Ace, Inc. 2008
Other Energy Projects Energy Ace, Inc. 2008
Is PC for You? Do you have: Aging buildings or equipment; Recurring maintenance problems or high maintenance costs; Comfort complaints; Scarce budget resources; Shortage of energy management expertise; Too many demands on your maintenance staff; No recent upgrades of your lighting or controls systems; Energy-using equipment that is ready for replacement? Energy Ace, Inc. 2008
Summary The Perfect Performance Contract delivers one- stop shopping for a complete energy program To Make Yours as Perfect as Possible 1. Use a Competitive Procurement 2. Include Checks and Balances in the contract 3. Use a Schedule of Values 4. Use a contract developed by a neutral party 5. Closely review savings projections 6. Be sure O&M savings are realistic and achievable 7. Treat it like any other construction contract 8. Have Experts on your side of the table to help all this come true Energy Ace, Inc. 2008
More Information Receive our free Energy Ace Newsletter Many Energy Tips on our website, www.energyace.com PC Information at www.energyservicescoalition.org/ www.naesco.org This presentation will be posted to our website Energy Ace, Inc. 2008
Questions? Energy Ace, Inc. 2008